APNU submits recommendations on new oil law to media instead of Govt.

Jun 28, 2023 ExxonMobil, News, Oil & Gas

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Kaieteur News – The A Partnership for National Unity (APNU) on Monday released its initial comments on the draft Petroleum Activities Bill to the media rather than the government.

Economic Advisor to the Leader of the Opposition, Elson Low told this newspaper that the party will not be submitting its views to the government as it stands by its view that the two-week period is unacceptable.

He said, “We wanted to highlight some issues that are vital and will look to address them and others more substantively when the bill is read in the National Assembly.”

On June 19, the Ministry of Natural Resources released the draft Bill and announced a two-week period for the public to submit their feedback.

Previously, the Opposition did not offer any comments on the model Production Sharing Agreements (PSAs) to govern future Shallow and Deepwater Blocks. When the Leader of the Opposition, Aubrey Norton was questioned by Kaieteur News’ reporters at a press conference last month, he said he was waiting on general elections to reveal his plans for the petroleum sector.

According to him, “we have looked at these issues and when we are ready, we are going to…we are a political party, we will head to an election, we have to time when we say what and when we begin to do our election campaign etcetera, we will state clearly what it is we intend to do; how we intend to do it and what changes we think are needed in some areas.”

In a subsequent statement, the party released some of its plans to manage the sector, indicating that it will seek a renegotiation of the Exxon contract during its first 50 days in office.

The Opposition in one of its eight bullet points on the proposed oil law pointed out that while the document considers unfavourable production and makes provision for royalty payments to be waived, it features no similar clause that can ensure Guyanese benefit from an increased royalty rate when companies enjoy a higher price on the sale of oil.

As a result of the ongoing war in Ukraine, oil prices sky-rocketed in 2022, surging to more than US$100 a barrel for the first time since 2014.

The political Opposition has raised concern that the draft oil law fails to make preparations for such an event. It explained that while it is acceptable to help companies through a financial crisis, government must also consider its people and seek to rake in more value when their partners thrive in favourable conditions. “Helping companies through financial crisis is acceptable. But while the Bill addresses reducing or deferring royalty payments to government by companies, there is no reciprocal or in-fairness provision for increasing royalty rates in situations where companies benefit from sustained high oil prices,” the party said.

The Opposition added, “Such thinking should be included in the Act, without unduly jeopardizing the predictability of the investment climate or fiscal regime.”

To this end, the political body said that the legislation should make provisions for a price-based, pre-set sliding or variable royalty rate, such as what obtains in the local gold industry.

All companies operating in Guyana will be required to abide by the legislation when enacted. The draft Petroleum Activities Bill replaces the Petroleum (Exploration and Production) Act 1986.

As it relates to royalty, the proposed law states that these payments can be deferred to another date or remitted by the Minister of Natural Resources, after consultation with the Minister of Finance. Vice President Bharrat Jagdeo at his press conference on Thursday said the government may tighten this provision to allow any such decision to be made by Cabinet rather than be approved by the Minister.

The draft oil law also makes provision for the royalty owed to the state be made in part-payments by the oil companies.

According to the draft Bill at Section 49 (1), “The Minister may, on application made to him by a licensee and after consultation with the Minister assigned responsibility for finance, by order— (a) remit, in whole or in part, any royalty payable by the applicant, or (b) defer payment of any royalty, on such conditions (if any) as he may specify in the order.”

The draft Bill also puts a penalty in place for any person who fails to pay the country royalty owed on or before the deadline. It notes that the Minister may, by notice served on the holder of the licence, prohibit the removal of, or any dealings in, or with, any petroleum from the development and production area concerned, or from any other development and production area subject to a licence held by that holder, or from both, until all outstanding royalty in arrears has been paid or until an arrangement has been made, and accepted by the Minister, for the payment of the royalty in arrears, and the holder shall comply with the notice.

The draft Bill goes on to make it clear that any person who contravenes these requirements shall be guilty of an offence and shall, on summary conviction, be liable to a fine of $20 million and imprisonment for three years.

The Petroleum Activities Bill is expected to be supplemented by a set of regulations that will follow in the coming months and provide the government the necessary toolbox for responsible and efficient management of the petroleum activities within the Guyanese economy. The document is available on the Ministry of Natural Resources websites: www.nre.gov.gy and www.petroluem.gov.gy. A two-week consultation phase is ongoing allowing for the public to provide feedback. All comments should be sent via email to [email protected] during the period and by close of business on Monday, 3rd July 2023.

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• benefit, companies, draft, Law, royalty

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